Alice's Wearhouse company has fixed costs of $7,000 and its variable costs for a range of output levels are shown in the table below. Calculate total cost, average cost, marginal cost, and average variable cost for the different quantities of output shown. (Hint: Add those costs to the table under the appropriate section you create.)
|
Quantity
|
Variable Cost
|
|
0
|
0
|
|
100
|
$500
|
|
200
|
$1,000
|
|
300
|
$3,000
|
|
400
|
$7,000
|
|
500
|
$14,000
|
|
600
|
$24,000
|
Based on your answers to Alice's Wearhouse, imagine a situation where a firm produces a quantity of 300 and that good sells at a price of $50 each.
What will be the company's profits or losses?
How can you tell at a glance whether the company is making or losing money at this price just by looking at average cost?
At the given quantity and price, is the marginal unit produced adding to profits?